Quantifying the Effects of Health Insurance Rate Review

This report from the Kaiser Family Foundation analyzes the effect of government efforts to ensure that insurance premium increases are justifiable and provide value to consumers and small businesses. Rate review programs require insurers in the small group and individual markets to submit proposed rate increase requests to state or federal regulators, who determine if the requests are reasonable. The report finds that one out of every five requests submitted to states in 2011 resulted in a lower rate increase or no increase at all. On average, approved rate increases were 1.4 percentage points lower than insurers initially requested, a reduction of about one-fifth.

Under the Affordable Care Act (ACA), all insurers requesting rate increases of 10% or more are subject to rate review programs as of September 1, 2011. If a state does not have an effective rate review program, the federal government conducts the reviews, though it does not have the authority to prevent insurers from implementing “unreasonable” rates. While many states had rate review programs in place before the ACA passed in 2010, early evidence suggests that insurers have made fewer requests to raise rates by 10% or more after the health reform law’s rate review provisions went into effect.